Johannesburg - On the sparkling tiles of Johannesburg’s newest luxury retail destination, one of two customers in the Burberry shop is trying on jackets.
“I see these brands advertised in magazines and know what I want, so I like to be able to walk into a shop and get it,” said Lunga Tshabalala, a 25-year-old manager at a water company in Bloemfontein, 400 kilometers (249 miles) away.
From Burberry to Ermenegildo Zegna, Prada and Jimmy Choo, the purveyors of the world’s most expensive consumer goods are counting on wealthy Africans to spend their rising disposable income on R40 000 ($3,153) handbags or a R25 000 bottle of bubbly at the Arque bar.
While they hope Africa will become a meaningful market in the image of Asian centers such as Hong Kong, where sales are currently falling due to slumping demand from China, their patience may be tested. Three months after opening there are often more security guards than shoppers at Diamond Walk in the heart of Johannesburg’s financial district.
The number of millionaires in Africa rose 145 percent between 2000 and 2014, compared with a global average of 73 percent, according to research company New World Wealth. Yet in South Africa consumer confidence dropped to a 14-year low in the second quarter of this year, hit by frequent power cuts and rising fuel prices that weighed on the economy.
Building a base
Further afield, a halving of crude oil prices in the past year is hitting growth in Nigeria and Angola.
“The decision to open shop in South Africa would have been taken when the African economies were booming, so if these companies are seeking newly rich customers, they may have to wait a while,” said Wayne McCurrie, a money manager at Momentum Wealth in Johannesburg. “My guess is that they can take losses for 10 years even and see it as building a base now for when Africa really takes off.”
Shopper numbers at Sandton City mall, where the Diamond Walk is located, have been about 24 million in each of the past two years, Julie Hillary, the mall’s general manager, said by e-mail. After investment of R185 million, the Diamond Walk is attracting locals and “a large amount” of spending by visitors from Nigeria, Kenya, Ghana and Angola, she said.
Positive numbers
Diamond Walk was designed “to offer a unique shopping experience to an ultra-select clientele,” a spokeswoman for Zegna said. “In the few months since it opened, the first sales data are very positive and represent an important indicator of future growth.”
Any opening of a Prada store in a new city “is carefully evaluated,” company spokesman Alessandro Bonucchi said by e-mail. Jimmy Choo didn’t respond to requests for comment.
“The brands are aspirational and these outlets are targeting the rest of Africa as much as South Africa,” said Syd Vianello, an independent retail analyst in Johannesburg. “If the stores don’t make much money initially, it is still building brand awareness, it could be seen as advertising.”
Back at Burberry, Lunga Tshabalala used a work trip to check out Diamond Walk. For his friend, Moeketsi Tsoenyane, also from Bloemfontein, having these shops in Johannesburg means he can access the elite options he longs for without the restriction of an overseas trip.
“I try to add extra time to my business trip for shopping,” said Tsoenyane, who has bought a Louis Vuitton belt and shoes within the last month. “It’s great to have all these brands in one place.”
BLOOMBERG